China-Bashing Lets EU Embrace Jekyll and Hyde: Cutting Research

France, the Netherlands and Spain would all have seen their share of exports to China reduced had they not so frequently complained about the nation’s trade practices, the report said. Photographer: Tomohiro Ohsumi/Bloomberg

March 22 (Bloomberg) -- European countries adopting a
“Jekyll and Hyde” strategy toward China have a greater chance
of winning more exports to the world’s fastest-growing major
economy, according to University of St. Gallen economists.

Nations that pushed the European Union to probe China for
product dumping later secured greater trade with the country,
the study said.

The biggest complainers in the last decade were France and
Germany, with 51 protests, followed by Italy with 41, according
to Simon J. Evenett, the lead author. France, the Netherlands
and Spain would all have seen their share of exports to China
reduced had they not so frequently complained about the nation’s
trade practices, the report said.

At the same time, the number of trade missions and visits
by government ministers to China also yielded a positive result
in terms of exports, the paper said. Trips by French and
Luxembourg officials raised their countries’ share of exports
sent to China by one-tenth and one-sixth respectively, according
to the analysis of trade data.

“Running to Brussels to complain pays, as does buttering
up the Chinese with visits to Beijing,” said Evenett in an e-mail. “A Jekyll and Hyde strategy worked.”

* * *

The U.S. could fall victim to a strain of Dutch Disease.

That’s economic parlance for the negative side effects
afflicting a country when a natural resources boom sparks an
export-driven surge in the currency, hurting domestic
manufacturing. It’s named for the experience of the Netherlands
in the 1960s and 1970s when it developed offshore oil and gas
supplies.

The growth of shale oil production in the U.S. could have
a similar, albeit smaller, impact, according to Michael Feroli
of JPMorgan Chase & Co.

The rise in energy independence will push up the dollar by
about 0.5 percent on a trade-weighted basis, JPMorgan says.
Feroli, in a March 19 report, estimated total energy input
prices would need to decline by 26 percent to offset that loss
in competitiveness.

Given that such prices increased 2.5 percent annually
over the past five years, that decrease may be a tall order and
so “it’s possible the U.S. could catch a very mild case of
Dutch Disease,” said Feroli, JPMorgan’s New York-based chief
U.S. economist.

* * *

Aging populations in major economies threaten the health of
financial markets as a large group of retirees sell assets to a
smaller group of savers.

So warn strategists at Morgan Stanley, who estimate that by
2030 the number of people 65 years old or more will have
increased 45 percent in the U.S., Europe and Japan.

Looking at the U.K., the March 18 report estimates
household wealth including pensions rises from a median of
12,900 pounds ($19,600) in the 16-24 age cohort to a peak of
416,100 pounds between the ages of 55 to 64. This then falls
over the next two decades.

“It is logical that there may be pressure on asset prices
as more people reach the point at which they need to
significantly draw down their own savings for consumption
purposes,” said the strategists.

Investors looking to take advantage of demographics should
seek stocks with high and secure dividends, such as French
electrical-equipment distributor Rexel SA and Norwegian phone
operator Telenor ASA, according to Morgan Stanley.

* * *

Rising inequality among American males is due to a
permanent rather than temporary shift in incomes, according to a
study co-written by two Federal Reserve economists. They suggest
the gulf between rich and poor is being driven by skill-biased
technical change and revamped compensation policies.

The authors drew that conclusion after studying inequality
in male earnings in the U.S. from 1987 to 2009, using what they
call a “new, large and confidential panel of tax returns.”

They also used the data to examine whether the federal tax
system helped reduce inequality. They concluded that the
structure is still progressive, taxing the rich at higher rates
than the poor. That “helped mitigate” the increase in
household income inequality, though not by enough to alter the
increasing trend.

The report was published yesterday by the Brookings
Institution, a Washington-based research group, and written by
Jason DeBacker, an associate professor of economics at Middle
Tennessee State University, Vasia Panousi and Ivan Vidangos of
the Fed’s Research and Statistics division, Bradley Heim, an
associate professor at Indiana University and Shanthi Ramnath,
an economist at the U.S. Treasury.

* * *

Countries that intervene in foreign-exchange markets swell
their current-account balance by as much as one dollar for every
dollar spent.

That’s according to a study published this month by Joseph
Gagnon of the Peterson Institute for International Economics. It
says efforts to weaken currencies lead countries to buy foreign
assets, pushing up trade imbalances. Such distortions helped
trigger the 2008 financial crisis, which led to the worst global
recession since the Great Depression.

Current account imbalances such as a large surplus in China
and a deficit in the U.S. “probably would not have occurred,
and certainly would not have persisted, without massive official
net purchases of foreign assets,” said Washington-based Gagnon,
a former Federal Reserve official.

* * *

Reductions in poverty caused by insufficient incomes are
being outstripped by declines in so-called multi-dimensional
poverty, Oxford University reports. Nepal and Rwanda are the
“star performers,”

Multi-dimensional poverty measures deprivation in health,
education and living standards as well as income.

The Oxford Poverty and Human Development Initiative
estimated in a March 18 report that 1.6 billion people are
suffering from it in 104 countries.

Nepal, Rwanda and Bangladesh have done the most to reduce
the broader measure of poverty, followed by Ghana and Tanzania.
Nepal did best in areas such as improving nutrition and child
mortality, while Rwanda showed the biggest improvement in
sanitation and water.

* * *

Americans are delaying marriage in part because of the weak
economy, according to a new study.

The average age of marriage has reached historic highs for
both genders -- 26.5 for women and 28.7 for men -- said the
study from the University of Virginia, the National Campaign to
Prevent Teen and Unplanned Pregnancy, and the RELATE Institute.

Part of the delay is due to less-educated workers finding
it harder to get jobs. In addition, those wanting middle-class
employment are seeking more training and education to secure it,
delaying marriage until they reach their goal.

There is a financial reward from delay. Women who finish
college and don’t get married until after 30 earn an average
$18,152 more per year than those who are in their 20s or teens
when they wed.

The result is marriage is now viewed as a “capstone” of
life, entered into after other part of life are addressed,
rather than a “cornerstone,” the authors said.